Richard Marsh, Apprenticeship Partnership Director, Kaplan Financial

Latest guidance on Apprenticeships published, but who should decide the cost of an Apprenticeship?

Just over 12 months ago Apprenticeship funding moved from a system based fundamentally on learner characteristics (age, location, etc) to one based on programme value (Caps).

Employers were also given more control over what was in an Apprenticeship (Standard) through the Trailblazer process and asked to negotiate the price that they were prepared to pay providers for these Standards – up to a maximum government support cap (i.e. you can pay more but not from your Levy / 90% Gov subsidy).

So how is this working?

In the latest document ‘ Apprenticeship Funding for England from August 2018’ it says..

“We expect employers to negotiate prices with training providers.. However, we have seen limited price negotiation in the market, with many employers telling us that they do not feel they are able to negotiate on price or that they consider the funding band upper limit to be the ‘rate’ set by government. Following feedback from stakeholders, we have decided to introduce more funding bands in order to support negotiation between employers and providers on price."

Is price the right negotiation point

The above statement is a fairly frank admission that the intended negotiation hasn’t materialised (of course we might have expected this given that the exact same thing failed to happen when students were given the ‘ability’ to negotiate their Degree rates).

The suggested remedy is to introduce more bands, more pricing options.

I can see how this will help the IFA in its ‘NICE’ type role as an allocator of caps as it gives them more flexibility when setting rates for new standards... – but I cannot see how 30 bands will “support negotiation between employers and providers on price” as the standard will already have had a cap set when and if this discussion takes place.

Indeed the DFE /ESFA seem to have missed a fundamental principle at play here.

Levy employers have already paid – the price was set at 0.5% of payroll – and by the time they find a provider the money has started to accumulate in their Digital Account.

So it’s almost too late to worry about price when they speak to a provider and there is little incentive to do so.

However there is a very real negotiation going on – and the actual negotiation is this

“What will you provide for this amount of money (cap) ” and / or

“How much of this prepaid budget do I want to utilise on the development of my employee”

NB Of course for non-levy payers and post levy payers there is a 10% contribution but this is a relatively small amount and does not drive the conversation.

And this must be a good thing? A very positive conversation.

Would we really want the core negotiation between an employer and provider to be about cost cutting – surely it is much healthier that the core conversation is about the :

  • Quality / Contents / Outcomes etc that the employer requires.

This is the stuff that really matters, not whether an apprenticeship costs £6,150 or £6,240.

And believe me it can (and should) be a very challenging conversation; employers do not succeed by being pushovers.

What should the Government role in this be

It is absolutely right that the Government safeguards public funds, monitors quality, excessive profiteering or improper conduct. And there are systems in place to do this (Ofstefd, Audit etc).

It is also surely their duty to ensure every apprentice gets a decent high quality experience.

To this end I think that it is scandalous that we persist with a min funding band of £1,500 (Frameworks) and £2,500 (Standards).

How can this amount of funding provide for a high quality programme, what does it tell us about the realities of funding-fairness and ‘parity of esteem’. Who deserves this little support?

Surely we need a £5,000 min rate to support high-quality, 372 day -20% off the job Apprenticeships, especially ones that also contain an expensive, external EPA.

The wrong instrument

There is always a temptation to use funding as a policy tool but invariably it fails.

When rates for over 25s were cut to just 40% of the 16-18 rate in 2012 – it did not reduce the number of over 25 Apprenticeships (they increased) but it did reduce their quality.

Lowering prices does not reduce demand just costs and therefore quality.

Anyhow in the ‘interests of stability’ the DFE have avoided making any further changes and this is to be welcomed.

“Since the introduction of apprenticeship reforms, we have received feedback from employers, training providers and interested groups. At this time, we have looked to prioritise stability for the market “

We can only speculate as to what changes they wanted to make but have pulled back from (assumedly as volumes are still so fragile).

One area they may well wish to meddle in may well be what is being studied and by whom.

Employers are choosing to spend their money (Levy and 10%) on the things that they feel that they need - which doesn’t always map neatly with the things that the Government wants them to need. IE high levels of Service and Management training for existing as well as new employees.

Higher level STEM skills for younger people are the crown jewels of the Vocational system but they aren’t the only training that our flexible economy needs. Hopefully employers are allowed to continue to decide what they need.

The lack of central planning (i.e failed forecasts) and its close links to the real economy are the core policy advantages of Apprenticeships over other courses. There is no wastage when training only takes place where it is needed by employers.

Care support

One progressive incentive contained in this latest round of guidance is the new £1,000 bursary for Care leavers.

It might be quite a peripheral amount of money and it is virtue signalling by Government, but it still something to welcome.

However this incentive and the 16-18 bursary need to be seen as being outside of the core cap process as like English and Maths they are about the state meeting its responsibility to help those who need it most.

Letting go of control

Funding caps and rates are the last levers that the Government has over Apprenticeships and so the temptation to use them and to be seen to act is very powerful.

But employers will not fully commit to Apprenticeships if they think that core issues like price are still subject to the whim of politicians and officials and will be constantly changed.

If we really believe in employer ownerships then let’s give them the space to own this and trust them to make the right decisions.

Richard Marsh, Apprenticeship Partnership Director, Kaplan Financial

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